Swedish GDP growing faster than expected

Sweden's second quarter GDP growth was even greater previously reported, according to revised figures from Statistics Sweden (SCB).

Sweden’s economy grew by 4.6 percent in the second quarter compared to the previous year, SCB reported on Wednesday, beating even the most optimistic projections by Sweden’s large banks.

“We thought there would be an upward revision, but not that it would be this much,” Olle Holmgren, an economist with SEB bank, told the TT news agency.

Previous figures had put GDP growth for the second quarter at 3.7 percent.

The restocking of inventories added about 2.6 percent to Sweden’s GDP growth figures, according to SCB, constituting one of the primary reasons for the upward trend.

“Looking forward a bit, things continue to look good for the third quarter. Based on that, it’s plausible that we’re going to see a real upward bounce in GDP this year, which will recover a large part of the fall in 2009,” he told TT.

Seasonally adjusted GDP increased by 1.9 percent compared with the first quarter of 2010, with household consumption rising by 2.4 percent and government spending up by 3.4 percent, according to SCB.

International trade also picked up, with exports rising by 13 percent and imports by 18 percent, while industrial production jumped up by 6.6 percent.

SCB’s numbers also showed that total employment, as measured as the number of hours worked, increased by 2.1 percent while the numbered of people employed increased by 0.8 percent.

According to Holmgren, SEB may revise its growth forecast in light of the new statistics, but added that the effect of inventories was likely temporary.

Nevertheless, Holmgren emphasized that demand remains strong.

“We can’t expect to have growth close to 5 percent for very long, but if you look at demand, we’re coming back on a broad front,” he told TT.

Holmgren also speculated that if uncertainties about the global economy blow over, the Riksbank may increase the pace at which it raises the repo rate.

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How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.”